1.1.1 Basis for preparation of financial statements
The financial statements have been prepared under the historical
convention and as a going concern as per the Generally Accepted
Accounting Principles and the Provisions of the Companies Act, 1956.
All income and expenditure having a material bearing on the financial
statements are recognized on accrual basis.
1.1.2 Revenue recognition
Revenue from software services is recognized on software developed and
billed to clients as per terms of specific contracts. In the case of
fixed-price contracts, revenue is recognized based on the work
Expenses are accounted on accrual basis.
1.1.4 Fixed assets
Fixed assets are stated at the cost of acquisition, less accumulated
depreciation. Cost comprises of purchases and attributable cost.
Inventory is valued at cost and work-in-progress is valued at cost or
realizable value whichever is less.
Depreciation on fixed assets is provided on pro-rata basis on
straight-line method at the rates specified in Schedule XIV of the
Companies Act 1956.
1.1.7 Foreign currency transactions
In the case of sales/services made to clients outside India, income is
accounted on the basis of the exchange rate as on the date of the
transaction. Adjustments are made for any variations in the sale
proceeds on conversion into India currency upon actual receipt. In the
case of expenditure in foreign currency, the expenses are accounted on
the basis of exchange rate as on the date of the transaction. In case
expenses are met out of EEFC accounts, the same is accounted for the
rate at which the EEFC funds are maintained in the books of account.
Long-term investments are stated at cost. The short-term investments
are valued and carried at cost or fair value whichever is lower.
Provision will be made for decline, other than temporary, in the value
1.1.9 Segment reporting
The company''s sales are basically related to providing software
services delivered to customers situated at USA. Hence the primary and
secondary segment reporting is based on the software development
services to USA only.
1.1.10 Cash Flow Statement
Cash flow statement is prepared to report the cash flows during the
period classified by operating, investing and financing activities.
1.1.11 Accounting for Taxes
Current income tax expense is determined in accordance with the
provisions of the Income Tax Act, 1961. Minimum alternative tax (MAT)
in accordance with tax laws is recognised as an asset which will be
adjusted against future income tax liability. Deferred tax expense or
benefit is recognised on timing differences being the difference
between taxable income and accounting income that originate in one
period and are capable of reversal in one or more subsequent period.
Deferred tax assets and liabilities are measured using the tax rates
and tax laws that have been enacted or substantively enacted by the
balance sheet date.
1.1.12 Earnings per share (EPS)
EPS is calculated in accordance with Accounting Standard 20 (AS20) by
dividing the net profit or loss for the period attributable to equity
shareholders with the weighted average number of equity shares
1.2.1 Taxes on Income as per Accounting Standard 22
a)In accordance with the Accounting Standard (AS)22 relating to
Accounting for Taxes on Income issued by the Institute of Chartered
Accountants of India, an amount of Rs.6,09,906/- has been recognized as
Deferred Tax Liability accrued during the year and Rs.3,45,964/- as
Deferred Tax Liability on time barred carry forward loss. Thus net
Deferred Tax Liability of Rs.9,55,870/- charged in Profit & Loss